Freeport Profit, Output Beat Forecasts
Freeport-McMoRan Copper & Gold, the world’s biggest publicly-traded copper miner, reported earnings that beat analysts’ estimates for the 15th consecutive quarter as production dropped less than forecast.
Net income fell 49 percent to $764 million, or 80 cents a share, from $1.5 billion, or $1.57, a year earlier, the Phoenix-based company said on Thursday in a statement. Profits excluding a $149 million charge related to the early extinguishment of debt were 96 cents a share, topping the 87-cent average of 21 estimates compiled by Bloomberg.
Revenue dropped 19 percent to $4.61 billion from $5.71 billion, beating the $4.58 billion average estimated by 13 analysts. Copper sales were 827 million pounds, compared with the company’s March 15 forecast of 795 million pounds.
Freeport halted production at its Grasberg mine in Indonesia for more than two weeks in February and March after violence flared among employees following a three-month strike last year. Disruptions at Grasberg, which has the world’s largest recoverable copper reserves, reduced first-quarter output by 80 million pounds and 125,000 ounces of gold, Freeport said.
Lower output in Indonesia was partly offset by higher sales from North America, the company said. Freeport expects full operations in Indonesia will be restored during the second quarter.
Freeport stocks fell 0.7 percent to close at $38.03 in New York. Shares have gained 3.4 percent this year.
The company’s net cost to produce copper in the first quarter was $1.26 a pound, which compares with 79 cents a year earlier. Brian Yu, an analyst at Citigroup in San Francisco, estimated net cash costs of $1.22.
“People are fully aware that there’s going to be some volatility coming out of Grasberg because of the work stoppage,” Michael Gambardella, a New York-based analyst at JPMorgan Chase & Co., said in an interview before the results were released. Copper and gold output and production costs at the mine “are going to fluctuate around quite a bit,” he said.
Freeport cut its 2012 sales forecast to 3.7 billion pounds of copper and 1.1 million ounces of gold, compared with a Jan. 19 projection of 3.8 billion pounds and 1.2 million ounces. Cash costs will average $1.43 a pound, up from an earlier $1.38 forecast.
“Overall, this is a good quarter under the circumstances, and the lowered guidance is not a surprise,” Yu said on Thursday in a note.
Freeport raised its forecast for capital spending this year to $4.3 billion from a January forecast of $4 billion.
Copper for delivery in three months on the London Metal Exchange averaged $8,329 a ton in the first quarter, 14 percent less than a year earlier. The metal used in pipes and wires rose 11 percent in the quarter on signs of strengthening economic growth in China and the US.
Indonesia wants a greater share of mining profits and has asked foreign holders of licenses to cut their stakes to 49 percent within 10 years of starting production, according to a decree signed by President Susilo Bambang Yudhoyono in February. The regulation applies to companies with mining business licenses. Freeport currently operates under a so-called contract of work.
Indonesia, Southeast Asia’s largest economy, has also proposed mining regulations that will ban exports of unprocessed ores by companies holding so-called mining licenses.
Freeport and other miners with contracts of work will be allowed to export ores until 2014, according to the rules.